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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

Telehealth scored the most venture dollars globally while digital therapeutics got the least in the third quarter of 2023, Erin writes.

Driving the news: Those are some of the highlights of a recent PitchBook report offering a hard look at which segments of the digital health industry over- and underperformed during an ongoing period of market uncertainty.

Details: As a whole, digital health traipsed its way through the third quarter, but the segments that performed well are predicted to continue thriving in the near future, report author and PitchBook health care analyst Aaron DeGagne writes.

Zoom in: In July alone, two large telehealth services closed rare late-stage venture rounds.

Halodoc, an Indonesian provider of virtual doctor consults and drug delivery services, raised $100 million in Series D financing.

K Health, an NYC-based developer of an AI-powered symptom-checking chatbot, raised $59 million following a 2021 Series E raise of $132 million.

Meanwhile, Akili, a Boston-based provider of digital therapeutics for ADHD, in September laid off 40% of its staff and shifted its model from a prescription basis to an OTC approach.

Akili's pivot came five months after Boston-based Pear Therapeutics, which provided digital tools to treat substance use disorders and insomnia via prescription, filed for bankruptcy.

Addiction telehealth provider PursueCare acquired Pear's addiction treatment apps last week.

Between the lines: Thrust into the spotlight amid the pandemic, telehealth remains a key component of the health care services landscape.

At the same time, slow progress toward reimbursement has blocked prescription-based digital therapeutics from gaining the necessary uptake.

By the numbers: Health tech venture funding "remained in the doldrums" in Q3, attaining just $0.8 billion in total financing via only 60 new deals.

Both figures are multiyear lows, per the report.

What they're saying: "Given the lack of meaningful industry drivers and near-term exit opportunities," DeGagne says, "we continue to expect digital health funding to remain at or near its current lows in the coming quarters."

Yes, but: "The open question is whether this is a permanent paradigm shift as virtual platforms fall out of favor, a temporary blip related to market conditions, or a cyclical low," DeGagne adds.

1 big thing: Digital health's winning and losing sectors

Genetic sequencing giant Illumina will finally divest cancer diagnostic test maker Grail after two years of battling with antitrust regulators, Aaron writes.

Why it's the BFD: It's a win for an FTC looking to crack down on antitrust, while offering up a blue chip asset for sale in a moribund M&A market.

Details: According to Illumina's press release, the divestiture will be executed through a third-party sale or capital markets transaction, consistent with the European Commission's divestiture order.

The company's goal is to finalize the terms by the end of the second quarter of 2024.

Catch up quick: On Friday, the U.S. Fifth Circuit Court of Appeals ordered the FTC to conduct a new review of Illumina's Grail purchase.

The court said that although the FTC had applied the wrong legal standard in its argument, the agency had substantial evidence to demonstrate the deal would hurt competition.

Following a review of the Court's opinion, Illumina elected not to pursue further appeals of the Fifth Circuit's decision.

Flashback: Illumina initially spun off Grail in 2016,  before buying it back in August 2021 in a deal worth $8 billion.

Over the ensuing months, Illumina's market value tanked by more than 50%, a drop that prompted activist investor Carl Icahn to launch a campaign to divest the business.

Former Illumina CEO Francis deSouza resigned in June and was succeeded by Jacob Thaysen.

What they're saying: "We are committed to an expeditious divestiture of Grail in a manner that allows its technology to continue benefitting patients," Thaysen said in the release.

"This is a major win for the FTC as it works to protect competition in health care," said Henry Liu, FTC Bureau of Competition director.

"Illumina's decision to unwind its acquisition of Grail ensures the market for cancer detection tests remains competitive and delivers a choice of high-quality tests for patients and physicians, ultimately saving lives."

2. The BFD: Illumina to divest Grail

Illustration of a test tube pouring into a hundred dollar bill

Want more health tech deals? Check out the Axios Pro Deals Tracker beta.

• Totus Medicines, an Emeryville, Calif.-based biotechnology research company, raised $66m in series B funding led by DCVC Bio. https://www.totusmedicines.com/

• Salvador Technologies, an Israeli provider of cyber-attack recovery tools for industries including health care, raised $6m in an unlabeled round led by Pico Venture Partners with participation from insiders including Pitango VC and Sarona Partners. https://www.salvador-tech.com 

• Yoni, a Dutch provider of menses products, raised €2.3m in unlabeled funding from ROM InWest, Rabobank and Invest International. https://axios.link/3NPvY0T

•  CVC Capital Partners agreed to buy Japanese pharmacy operator Sogo Medical Group for around $1.2b. https://axios.link/3ROKgBf

• EQT announced plans to acquire Zeus, an Orangeburg, S.C.-based developer of luoropolymer tubing for medical devices and industrial applications, from the Tourville family. https://eqtgroup.com/ 

3. Deals o' the day

• Lisa Alderson, former CEO of Genome Medical, joined Adela as CEO. https://axios.link/3Rrc39p 

• Ryan Kaeding, former managing director of med tech investment banking at Raymond James, joined Trinity Capital as a managing director of life sciences. www.trinitycap.com

• Sara Crate, former chief commercial officer at DispatchHealth, became CEO of Homebase Medical. https://www.homebasemedical.com/

• Mitch Steffens, former investment associate at Baird, joined Palm Tree as VP of investment banking helping to lead the firm's health care vertical. https://axios.link/41pbBNB

• Karandeep Singh, former associate professor at the University of Michigan, joined UC San Diego Health as its first chief health AI officer. https://axios.link/3v63HfE

• Jay Bradner, former physician-scientist at Novartis, joined Amgen as EVP of R&D. https://axios.link/3GIT5WL 

• Nassim Usman, former CEO at Catalyst Biosciences, joined Totus Medicines as CEO. https://www.totusmedicines.com/

• Paul Martino, co-founder of VillageMD, joined Forge Health as chair of the board. https://axios.link/46Zyb04

4. It's Personnel

 🤳🏻 WeightWatchers launches telehealth service — Modern Healthcare

👀 Health care leaders are eyeing the door — Fierce Healthcare

🤖 Providers to join White House plan to manage AI risks — Reuters

⚖️ HCSC, Elevance compete for Cigna MA unit — Bloomberg

💊 Currax fights EU regulators over weight-loss drug — Axios

5. Your daily dose

Illustration of a weekly pill dispenser box with a newspaper called "daily dose" in each compartment.

Situational awareness: We have a new landing page for our Deals Tracker.

And you can now access the Tracker straight from the Pro home page. Have a look, and let us know what you think.

💍 💒 Aaron proposed to his girlfriend Thursday night and spent the weekend celebrating — now all the wedding prep can commence. 

😍 Thanks for reading, and extra thanks to newsletter editor Claire Rychlewski and copy editor Brad Bonhall. Please ask your colleagues, friends, and family to sign up.

December 18, 2023

1 big thing: Digital health's winning and losing sectors